280: How To Prepare Your Business For Sale And What Multiples To Expect With Thomas Smale

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Selling an online business means being paid a multiple of net income, and which multiple depends far more on predictability than on size. Thomas Smale sees ecommerce businesses trade at roughly 2x to 4x, SaaS at 3x to 4.75x, and content sites at 2.25x to 3.25x, with recurring revenue being the single biggest reason SaaS sits highest.

Thomas founded FE International in 2010 and has completed hundreds of millions in SaaS, ecommerce, and content acquisitions, with a network of over 41,000 active investors.

This episode covers what each business model sells for, which factors actually move your multiple, how to prepare, and what the sale process and fees look like.

Key takeaways

• Ecommerce trades at 2x to 4x net income, SaaS at 3x to 4.75x, content at 2.25x to 3.25x.
• Recurring revenue is why SaaS commands the highest multiples. Subscription ecommerce gets similar treatment.
• A proven buyer email list can function like recurring revenue, provided you can show repeat purchases.
• Patents barely move the number. Buyers care whether the product is genuinely unique and defensible.
• Consistent growth in both revenue and profit matters more than either alone.
• Multiples start rising above roughly $10 million in revenue.
• Upfront cash runs 50% to 80%, with the rest performance-based, plus inventory paid separately at cost.
• Timeline runs about a month at $100K, two months at $1M, three months at $10M.

How Thomas Smale ended up brokering online businesses

He started at college trying to make extra money, first buying and selling domains, which went poorly because he could not find any consistent process behind it.

Websites made more sense given his business degree. With no capital, he would put $100 on a credit card at the start of a month, buy a site, improve it, sell it before month end, pay off the card, and repeat.

In 2010 he wrote a book and course teaching that process, expecting the business to be part education and part flipping.

What actually happened is that buyers of the course did not want to do it themselves. They wanted to hire someone.

His first brokered deal was a $20,000 sale he was paid nothing for. Word of mouth compounded from there, at a time when almost nobody was brokering online businesses even though traditional business brokerage was long established.

What multiples each business model commands

FE International focuses on three models: ecommerce including Amazon FBA and Merch, SaaS and software, and content sites monetized through affiliates or advertising.

SaaS sits highest because it almost always has recurring revenue.

An ecommerce business with genuine recurring revenue, such as a subscription box, membership, or subscribe-and-save model, gets valued similarly to SaaS.

Content has a tighter range partly because you are not selling a product. The value is in the content itself, which buyers weigh less heavily, though outliers exist. Thomas closed a $12 million content deal shortly before we spoke at a multiple well above that range.

Why growth consistency matters most in ecommerce

The pattern Thomas sees more in ecommerce than any other model is businesses that grow substantially and then decline.

Amazon makes consistent growth genuinely difficult. A business might do a million in sales, then $950,000, then $1.2 million, with margins fluctuating alongside.

Businesses growing both top line and bottom line consistently earn much higher multiples, and they are relatively uncommon.

The reason is that ecommerce margins move in ways SaaS and content margins do not. Platform fees, fulfillment fees, and product costs all shift, and each shift changes your net.

How SKU count and product launches affect value

A single product line produces a lower multiple than multiple lines.

Constant new product launches raise a specific question for buyers: how sustainable is that, and how easily can someone else take it over?

If you have a genuinely repeatable process for launching products, buyers are comfortable. If the launches depend on you personally as the designer or product developer, or on a launch strategy unique to you, it becomes harder to sell.

The underlying question a buyer asks is whether the business will keep performing at its current level or better after they own it. A confident yes produces a higher multiple.

Whether Amazon or your own store is worth more

The platform itself does not change the multiple. What matters is what sits behind the traffic.

A Shopify store getting all its traffic from Facebook ads is generally harder to sell and attracts a smaller multiple, because performance depends on campaign effectiveness and usually on the operator’s skill.

The valuable version is a store with an email list where a meaningful share of each new product launch is bought by existing subscribers. That functions as recurring revenue from a buyer’s perspective.

Amazon’s advantage is reach and customer volume. Its weakness is that you never truly own the customer, and emailing them about a new launch while staying compliant is difficult.

Why a proven buyer list is worth more than a big list

The distinction Thomas draws is between subscribers and customers.

Ten thousand emails collected from a free ebook lead magnet, where none have bought, is worth considerably less than a thousand past customers who have each spent $100 or more.

Segmentation is what proves it. Being able to show that a specific cohort has purchased multiple times at a known lifetime value is the evidence buyers respond to.

His observation is that most ecommerce owners with an email list have no thought behind it beyond emailing when a new product launches, so having that analysis already puts you ahead.

Whether patents and trademarks raise your valuation

Having a patent versus not having one does not meaningfully change the value.

The reason is that anyone can obtain a patent, and it does not indicate anyone wants the product.

What buyers actually assess is whether the product is genuinely unique and how defensible that is. An exclusive supplier deal, brand protection, a trademark, or a patent all contribute to that picture.

Being a reseller is not automatically bad, and those businesses generally sell for less because margins are lower and fluctuate more with new competition.

The exception is your own audience. An email list may not care that a product is available elsewhere, because they are not looking elsewhere.

How social media following factors into valuation

Any active audience of existing or potential customers matters, and proving it benefits the business matters more.

The proof is either sales or genuine interaction. Followers who are not customers still have value if they share your content with people who could be.

Buyers have become considerably more sophisticated about this. Facebook pages with a million fans and three likes per post were common historically, and buyers now look at engagement rather than follower count.

There is no per-follower valuation. The question is how the audience interacts, and if they are your perfect target audience and still not buying, that itself tells a buyer something.

How to value traffic sources buyers cannot attribute

Instagram is difficult to track directly, and reasonable confidence is achievable.

If Google Analytics shows a consistent traffic and sales spike at the same time you post daily, it is fair to attribute it even without exact tracking.

The honest complication is that the Instagram post might prompt someone to tell a friend, to Google you, or to check their email for your offer.

Thomas’s conclusion is that channels cannot be assessed individually. What matters is how they correlate together.

Organic Google traffic carries high value when sustainable, and it is still a platform dependency with penalty risk.

How business age affects your multiple

Age is a genuine factor because it demonstrates predictability.

Five years of increasing Google traffic year over year makes a buyer far more comfortable paying a higher multiple.

Two years of traffic that rose and then fell is worth considerably less, regardless of the current number.

The principle is that a business around for longer is more likely to continue, at least in a buyer’s assessment.

Does revenue size raise your multiple?

There is a correlation, without any threshold where value suddenly jumps.

Small businesses can still achieve high multiples because of competition. A $500,000 ecommerce business faces a large pool of buyers, and demand alone can lift the number.

Multiples generally start increasing above roughly $10 million in revenue, which is where you begin seeing figures above 4x. Thomas was working on a profitable Amazon business doing around $15 million at a multiple above 4x.

Size does not guarantee quality. A $10 million business is not automatically good from a buyer’s perspective, and a $1 million business is not automatically bad.

The first step in preparing to sell

Thomas’s answer has nothing to do with the business. It is establishing what you want to achieve.

That has to be agreed with everyone involved: a spouse or partner personally, and business partners or investors professionally.

The reason is blocking. A business can check every box for a high valuation and sell readily, and if one stakeholder wants something different, nothing happens.

Once you have a number, get a free valuation. Any reputable broker offers one, and most people obtaining one are not ready to sell.

The point is measuring the gap. Valued at $5 million against a $6 million target means you mostly need to run the business longer. Valued at $500,000 against a $20 million target means substantial work ahead.

Should you grow revenue or profit?

Both, and the common mistake is doing one while ignoring the other.

Thomas frequently sees people triple revenue while their net stays flat, usually by buying traffic.

Revenue growth can come with slightly lower margins and still be fine, provided the absolute net figure rises.

The number that matters is net, because that is what gets multiplied. Revenue growth proves people want your product, and profitability proves the growth is worth having.

What not to do while preparing to sell

The dangerous version of margin improvement is cutting things that damage the long term without showing up in short-term results.

The common examples are cutting a support rep or stopping blog content production.

Both improve net immediately and undermine the business a buyer is inheriting.

Thomas also notes the opposite risk. A business where every possible margin improvement has already been made can be harder to sell, because buyers want visible upside.

What a broker charges and how the process runs

FE International works on success fees, at 15% of sale price on the first million dollars of value, tiering down above that. Nothing is paid unless the business sells.

After signing an engagement agreement, the discovery process begins with a questionnaire of roughly a hundred questions plus a full financial review.

Any data you have gets used to support the sale. A well-segmented email platform lets them prove that a specific number of subscribers have bought repeatedly at a known value.

That becomes a prospectus, typically 30 to 40 pages, taking a couple of weeks to prepare and signed off by you for factual accuracy.

Their approach to problems is disclosure. Buyers discover issues eventually during diligence, so covering them up costs you months.

How buyers are approached in stages

The first outreach goes to a small, precisely matched list of buyers who have already specified criteria matching your business, alongside potential strategic buyers.

About a week later it goes to the full network of over 41,000 active investors, as a high-level overview only.

Anyone requesting details signs a nondisclosure agreement first, so your domain and financials are never broadcast.

The broker then filters. Many people are simply curious or would enjoy a conversation with a successful owner, and the job is separating them from genuine potential buyers before you spend time on calls.

Negotiation follows, ideally with multiple offers. On one eight-figure Amazon business they received eleven offers and narrowed from there.

How online business sale deals are structured

In ecommerce, expect cash upfront in the range of 50% to 80% of deal value, with the remainder performance-based or seller financed.

Inventory is paid for separately at cost.

The upfront share depends on the risk factors already covered. Single channel, single product, or heavy reliance on one traffic source pushes you toward less cash upfront and more performance-based payment.

An older business with multiple channels, multiple products, and consistent growth earns both a higher multiple and more cash upfront, because there is less reason to structure around risk.

How long selling a business takes

Roughly a month for a $100,000 business, two months at $1 million, and three months at $10 million.

Small deals move fast because there are many buyers, the businesses are simpler, and diligence is lighter with fewer transactions, fewer products, and simpler contracts.

Larger deals take longer because accountants, lawyers, and other third parties are involved and the contracts carry more contingencies.

FE International’s stated success rate on deals taken on is 94.1%.

On legal support, brokers cannot advise you legally and can draft the sale agreement. Smaller sellers often represent themselves, and larger sellers typically already have accountants and attorneys on retainer, billed separately.

Frequently asked questions

What multiple do online businesses sell for?

Ecommerce typically 2x to 4x net income, SaaS 3x to 4.75x, and content sites 2.25x to 3.25x. Recurring revenue is the main reason SaaS sits highest.

Does having an email list increase business value?

Yes, if you can prove those subscribers buy. A segmented list of past customers with known lifetime value is far more valuable than a large list of freebie signups who have never purchased.

Do patents increase what a business sells for?

Not meaningfully. Anyone can obtain a patent, and buyers assess whether the product is genuinely unique and defensible through exclusivity, brand protection, or supplier relationships.

Is an Amazon business worth less than a Shopify store?

Not inherently. What matters is dependency. A Shopify store reliant entirely on Facebook ads is harder to sell than an Amazon business, while a store with a proven buyer email list is worth more than either.

Should you grow revenue or profit before selling?

Both. Net income is what gets multiplied, and revenue growth proves demand. Tripling revenue while net stays flat, which usually happens through bought traffic, does not help.

How much cash do you get upfront when selling?

Typically 50% to 80% of deal value, with the rest performance-based or seller financed, plus inventory paid separately at cost. Higher-risk businesses get less upfront.

How long does it take to sell an online business?

About a month for a $100,000 business, two months at $1 million, and three months at $10 million, with larger deals taking longer because of legal and financial complexity.

What does a business broker charge?

FE International charges 15% of sale price on the first million dollars of value, tiering down above that, paid only on a successful sale.